Nepal's total debt in 2005 increased to 19.8 billion Nepali rupees (271.4 million U.S. dollars) posting a heavy fiscal burden, the Asian Development Bank (ADB) said in its latest report issued here on Monday.

Burgeoning debt servicing has been a serious concerns given a sharp fall in recent years in foreign loan financing.

"Security outlays has also increased to 17.5 billion rupees ( 250 million dollars), accounting for about 20 percent of total government spending," the ADB report stated.

However, hike in domestic credit was found robust, encouraged by commercial banks' efforts to expand consumer loan volumes through attractive packages and heavy marketing.

Commercial banks' liquidity tightened slightly in 2005, but remained ample, and their deposits rates showed no upward movement, staying well below inflation, according to the report.

The hike in the prices of petroleum products and daily consumer goods, the Value-Added Tax (VAT) rate, as well as civil servants' salaries contributed to increase inflationary pressures that registered at about 7 percent, the report said.

In the meantime, revenue has increased by 0.75 percentage points to 13.1 percent of gross domestic product (GDP) buoyed by an increased in the VAT rate from 10 percent to 13 percent and significant collection of dividends from Nepal Telecom (NT), a state-owned corporation.

However, according to the Nepal Rastra Bank (NRB), the central bank of the country, revenue growth stands only at 0.1 percent which is very negligible, due to 19-day long strike started on April 6.

"If the same situation lingers for a few more months, the government will not be in a position to meet revenue target," an NRB official said on condition of anonymity.

According to the ADB report, overseas remittances rose by 17.6 percent to 1.1 billion dollars in 2005, and contributed to offset the pronounced decline in tourism receipts as well as the traditional trade deficit.

Meanwhile, the ADB has set low GDP growth in Nepal at 2 percent for 2006 and 3.4 percent for 2007.

Source: Xinhua